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Endogeneity and Simultaneity in Competitive Pricing and Advertising: A Logit Demand Analysis

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  • Pradeep K. Chintagunta

    (University of Chicago)

  • Vrinda Kadiyali

    (Cornell University)

  • Naufel J. Vilcassim

    (London Business School)

Abstract

In this article, we use four data sets to provide a benchmark study of the effects of accounting for endogeneity and simultaneity in estimating marketing-mix effects in a logit demand framework. We compare the results obtained from accounting for endogeneity only to those from accounting for both endogeneity and simultaneity, and in the latter case we allow for more general models of firm behavior to examine the consequences of imposing assumptions about the behavior of firms. We find that accounting for both endogeneity and simultaneity not only affects the parameter estimates but also results in efficiency gains that affect the statistical significance of the estimates.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 79 (2006)
Issue (Month): 6 (November)
Pages: 2761-2788

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Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:6:p:2761-2788

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Web page: http://www.journals.uchicago.edu/JB/

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Cited by:
  1. Till Dannewald & Lutz Hildebrandt, 2008. "A Brand Specific Investigation of International Cost Shock Threats on Price and Margin with a Manufacturer-Wholesaler-Retailer Model," SFB 649 Discussion Papers SFB649DP2008-070, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  2. Edlira Shehu & Tim Prostka & Christina Schmidt-Stölting & Michel Clement & Eva Blömeke, 2014. "The influence of book advertising on sales in the German fiction book market," Journal of Cultural Economics, Springer, vol. 38(2), pages 109-130, May.
  3. Maria Petrova, 2009. "Newspapers and Parties: How Advertising Revenues Created an Independent Press," Working Papers w0131, Center for Economic and Financial Research (CEFIR).
  4. Jordi McKenzie & W. Walls, 2013. "Australian films at the Australian box office: performance, distribution, and subsidies," Journal of Cultural Economics, Springer, vol. 37(2), pages 247-269, May.

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